An investigation of the short-term performance of the Canadian IPO market

This article explores the short-term return performance of the Canadian initial public offering (IPO) market. Historically, the Canadian IPO market has shown to be one of the least underpriced markets in the world. This paper uses recent IPOs from 2010 to 2017, and the results confirm that the Canadian IPO market remains one of the least underpriced IPO markets in the world. The mean (median) first-day returns show that Canadian IPOs are marginally underpricing at only 1.45% (0.24%) during the sample period. Additional short-run return measures indicate that Canadian IPOs underperform the market in their 1-month, 6-month, and 12-month holding periods. This research also contributes to the existing IPO literature by showing that restricted voting share offerings tend to be more underpriced and perform poorly over the short-term.